PART 13. STATE TEACHERS' RETIREMENT SYSTEM [22000 - 25115]

CHAPTER 29. Benefit Maintenance [24400 - 24417]

The Legislature recognizes that inflation erodes the purchasing power of benefits paid under the plan under this part. It is the intent of the Legislature to understand the degree of erosion of these benefits.

This chapter does not give any retired member, or a retired member’s successors in interest or beneficiary, any claim against the board, system, or plan for any increase in any allowance paid or payable prior to July 1, 1972.

(a) Service retirement allowances, disability allowances, disability retirement allowances, family allowances, and survivor benefit allowances payable pursuant to this part shall be increased by application of the benefit improvement factor.

(b) Allowances payable to beneficiaries on account of options elected under Section 24300, 24300.1, 24307, or 24332 shall be increased by application of the improvement factor. This factor shall be applicable on the same date when it would have been applied to the allowance of the deceased person.

(c) The benefit improvement factor shall not be applied to
an annuity that is the actuarial equivalent of the accumulated annuity
deposit contributions standing to the credit of the member’s account on the effective date of a service or disability retirement.

The allowances that commenced to accrue prior to July 1, 1972, and payable on August 1, 1972, exclusive of annuities from the Annuity Deposit Fund and tax-sheltered annuities payable under former Sections 14193, 14280 and 14284, as those sections read on June 30, 1972, shall be increased by application of the benefit improvement factor on September 1, 1973, and annually thereafter.

The first three hundred dollars ($300) of the monthly allowances payable to retired members, disabled members, and beneficiaries are increased as of July 1, 1976, as follows if the member had 20 or more years of credited service:

(a) For those with effective dates prior to July 1, 1972, 9 percent.

(b) For those with effective dates from July 1, 1972, to June 30, 1973, 6 percent.

(c) For those with effective dates from July 1, 1973, to June 30, 1974, 3 percent.

The first three hundred dollars ($300) of the monthly allowances payable to retired members, disabled members, and beneficiaries are increased as of July 1, 1978, for those members receiving allowances on July 1, 1978, if the member had less than 20 years of credited service, as follows:

(a) For those with effective dates prior to July 1, 1972, 9 percent.

(b) For those with effective dates from July 1, 1972, to June 30, 1973, 6
percent.

(c) For those with effective dates from July 1, 1973, to June 30, 1974, 3 percent.

(a) The monthly allowances payable to retired members, disabled members, and beneficiaries are increased as of January 1, 1980, for those persons receiving allowances with respect to members who retired or died prior to June 30, 1973, to the amount that results when the initial allowance that was received by those members is multiplied by the percentage set forth opposite the year of retirement or death in the following schedule:

Period During Which

Retirement or Death Occurred

Percentage

On or before June 30, 1958
........................

180.4

12 months ending June 30, 1959
........................

175.8

12 months ending June 30, 1960
........................

172.2

12 months ending June 30, 1961
........................

169.8

12 months ending June 30, 1962
........................

167.8

12 months ending June 30, 1963
........................

165.5

12 months ending June 30, 1964
........................

163.0

12 months ending June 30, 1965
........................

159.8

12 months ending June 30, 1966
........................

156.7

12 months ending June 30, 1967
........................

153.1

12 months ending June 30, 1968
........................

147.5

12 months ending June 30, 1969
........................

141.6

12 months ending June 30, 1970
........................

134.5

12 months ending June 30, 1971
........................

128.7

12 months ending June 30, 1972
........................

124.5

12 months ending June 30, 1973
........................

119.6

(b) For those retired members, disabled members, and beneficiaries receiving an allowance with an effective date prior to July 1, 1965, the initial allowance, for purposes of this section, shall be deemed to be the allowance payable on July 1, 1965. However, for purposes of determining the allowance payable under this section, the percentage corresponding to the actual year of retirement shall be applied.

(a) The minimum unmodified allowance, exclusive of annuities from accumulated annuity deposit and tax-sheltered contributions, of a person retired prior to January 1, 1981, shall be an amount equal to at least sixteen dollars ($16) per month multiplied by the years of credited service. This guaranteed amount shall be increased as of October 1, 1980, and shall be reduced by the amount of an unmodified allowance payable from a local system based on service credited under this part. If the retirement was effective at less than age 60 years,
this allowance shall be reduced by one-half of 1 percent for each full month or fraction of a month that would have elapsed until the retired member would have reached age 60 years. If the retired member elected to have the allowance modified under Option 2 or 3, the increase in the retired member’s allowance shall be modified under the option selected.

(b) The board may make lump sum payments for increases between October 1, 1980, and January 1, 1981.

The minimum unmodified allowance, exclusive of annuities from accumulated annuity deposit and tax-sheltered contributions, of (a) a person who retired on or before December 31, 1981, (b) the option beneficiary of a person who retired on or before December 31, 1981, or (c) a person receiving a monthly allowance in lieu of the death benefit payable on account of the death of a member whose death occurred prior to July 1, 1972, shall be an amount equal to at least eighteen dollars ($18) per month multiplied by the years of credited service. This guaranteed amount is
increased as of September 1, 1981, and is applicable to allowances paid on and after September 1, 1981. If the retirement was effective at less than age 60 years, this allowance shall be reduced by one-quarter of 1 percent for each full month or fraction of a month that would have elapsed until the retired member reached age 55 years, and the allowance shall be reduced by one-half of 1 percent for each full month or fraction of a month between age 55 and age 60 years. If the retired member elected to have his or her allowance modified under Option 2 or 3, the increase in the retired member’s allowance shall be modified under the option selected.

(a) If projected final compensation is used to calculate the service retirement allowance following the termination of the disability allowance or if the disability allowance is continued as the lesser of the two allowance calculations under Section 24212 or 24213, then the original disability allowance effective date shall be retained as the base date for purposes of determining postretirement benefit increases.

(b) If the disability allowance effective date is used pursuant to subdivision (a), then for purposes of determining supplemental benefits pursuant to Sections 24412 and 24415, the base allowance shall be determined as follows:

(1) If the disability
allowance is continued pursuant to Section 24212 or 24213, the base allowance shall be equal to the disability allowance prior to all allowance increases made pursuant to this part.

(2) If the disability allowance is not continued pursuant to Section 24212 or 24213, the base allowance shall be based on the factors used to calculate the service retirement allowance, except that projected final compensation shall be replaced with the final compensation upon which the disability allowance was based.

(3) The base allowance determined pursuant to this subdivision shall be modified for an option, if applicable.

(c) This section shall be applicable for determining the base date for applicable postretirement increases made on or after January 1, 1982.

(d) This
section shall only apply to service retirements effective the day after the termination date of the disability allowance.

(a) Notwithstanding any provision of this part, including, but not limited to, subdivision (e) of Section 22664, the annual allowance payable on the effective date of this section to a retired member, an option beneficiary, or a surviving spouse receiving an allowance pursuant to either Section 23805 or 23855 shall not be less than the amount identified in the following schedule for the number of years of the member’s credited service under the Defined Benefit Program at the time of the member’s retirement, disability, or death, excluding
service credited pursuant to Sections 22714, 22715, 22717, and 22826, after the application of all allowances and allowance increases authorized by this part, including those specified in Sections 24412 and 24415, as those sections read on December 31, 1999, and excluding annuities payable from the accumulated annuity deposit contributions or the accumulated tax-sheltered annuity contributions:

20 years of credited service
........................

$15,000

21 years of credited service
........................

$15,500

22 years of credited service
........................

$16,000

23 years of credited service
........................

$16,500

24 years of credited service
........................

$17,000

25 years of credited service
........................

$17,500

26 years of credited service
........................

$18,000

27 years of credited service
........................

$18,500

28 years of credited service
........................

$19,000

29 years of credited service
........................

$19,500

30 years or more of credited service
........................

$20,000

(b) Notwithstanding subdivision (a), the amount identified in the schedule in subdivision (a) shall be reduced:

(1) By 50 percent
for a beneficiary receiving an allowance under Option 3 or Option 7.

(2) By one-third for an option beneficiary receiving an allowance under Option 4 after the death of the member or for a member receiving an allowance under Option 4 after the death of the option beneficiary.

(3) By 50 percent for an option beneficiary receiving an allowance under Option 5 after the death of the member or for a member receiving an allowance under Option 5 after the death of the option beneficiary.

(4) By a percentage equal to 100 percent minus the percentage of the member’s modified allowance received by the option beneficiary for each option beneficiary receiving an allowance under Option 8.

(5) By 60 percent for a surviving spouse receiving an allowance pursuant to
subdivision (a) of Section 23805.

(6) By 50 percent for a surviving spouse receiving an allowance pursuant to subdivision (c) of Section 23805 or Section 23855.

(c) A member to whom a disability allowance is payable on January 1, 2000, who subsequently receives a service retirement allowance pursuant to Section 24213 shall, upon the retirement for service, receive an increase in the service retirement allowance pursuant to this section.

(d) A member, beneficiary, or surviving spouse may receive an allowance pursuant to this section only if the member was an active member at the time of the member’s retirement, or death and, for those members who retired for service, the member retired on or after age 55, unless the member’s allowance was not subject to a reduction due to retirement prior to an age specified in this
part.

(e) A retired member, option beneficiary, or surviving spouse subject to this section shall receive the annual minimum allowance pursuant to this section unless the system receives in writing, on a form prescribed by the system, notification from the member, option beneficiary, or surviving spouse before May 1, 2000, of his or her election not to receive the increase provided under this section.

(f) Benefits payable under this section shall be initially paid by the system on July 1, 2000.

(a) Notwithstanding any provision of this part, including, but not limited to, subdivision (e) of Section 22664, and except as provided in subdivisions (b) and (c), the annual allowance payable on the effective date of this section to a retired member, an option beneficiary, or a surviving spouse receiving an allowance pursuant to either Section 23805 or 23855 shall not be less than the amount identified in the following schedule for the number of years of the member’s credited service under the Defined Benefit Program at the time of the
member’s retirement, disability, or death, excluding service credited pursuant to Sections 22714, 22715, 22717, and 22826, after the application of all allowances and allowance increases authorized by this part, including those specified in Sections 24412 and 24415, as those sections read on December 31, 2000, and excluding increases authorized by Section 24410.7 and annuities payable from the accumulated annuity deposit contributions or the accumulated tax-sheltered annuity contributions:

20 years of credited service
........................

$15,000

21 years of credited service
........................

$15,500

22 years of credited service
........................

$16,000

23 years of credited service
........................

$16,500

24 years of credited service
........................

$17,000

25 years of credited service
........................

$17,500

26 years of credited service
........................

$18,000

27 years of credited service
........................

$18,500

28 years of credited service
........................

$19,000

29 years of credited service
........................

$19,500

30 years or more of credited service
........................

$20,000

(b) Notwithstanding subdivision (a), the amount
identified in the schedule in subdivision (a) shall be reduced:

(1) By 50 percent for a beneficiary receiving an allowance under Option 3 or Option 7.

(2) By one-third for an option beneficiary receiving an allowance under Option 4 after the death of the member or for a member receiving an allowance under Option 4 after the death of the option beneficiary.

(3) By 50 percent for an option beneficiary receiving an allowance under Option 5 after the death of the member or for a member receiving an allowance under Option 5 after the death of the option beneficiary.

(4) By a percentage equal to 100 percent minus the percentage of the member’s modified allowance received by the option beneficiary for each option beneficiary receiving an allowance under Option
8.

(5) By 60 percent for a surviving spouse receiving an allowance pursuant to subdivision (a) of Section 23805.

(6) By 50 percent for a surviving spouse receiving an allowance pursuant to subdivision (c) of Section 23805 or Section 23855.

(c) A benefit shall be paid pursuant to this section if both of the following apply:

(1) The retired member, the option beneficiary, or the surviving spouse had an allowance payable on January 1, 2000, and was not eligible to receive a benefit pursuant to Section 24410.5.

(2) The retired member or the member whose service was the basis of the allowance payable to the option beneficiary or surviving spouse was one of the following:

(A) A member who retired prior to the age of 55 years, provided the minimum allowance specified in subdivision (a) shall be reduced to an amount equal to that minimum allowance multiplied by the ratio of the percentage of final compensation per year of credited service on which the member’s initial allowance was based to 1.4.

(B) A member who was paid a retirement allowance pursuant to Section 24211, 24212, or 24213, if the member’s credited service, excluding service credited pursuant to Sections 22714, 22715, 22717, and 22826, was less than 20 years but whose projected service to normal retirement age, excluding service credited pursuant to Sections 22714, 22715, 22717, and 22826, was equal to or greater than 20 years, provided that the minimum allowance payable shall be based on 20 years of credited service.

(C) A
member who retired as an inactive member.

(D) A member who retired prior to March 21, 1974, with 19.5 years or more of credited service, provided that the minimum allowance payable shall be based on 20 years of credited service.

(E) A member who retired on or after March 21, 1974, and prior to January 1, 2000, and whose credited service, excluding service credited pursuant to Sections 22714, 22715, 22717, and 22826, was less than 20 years, but whose credited service, excluding service credited pursuant to Sections 22714, 22715, and 22826, but including service credited pursuant to Section 22717, was equal to or greater than 20 years, provided that the minimum allowance payable shall be based on 20 years of credited service.

(F) A member whose credited service, excluding service credited pursuant to Sections 22714,
22715, and 22826, but including credited service that a court has ordered be awarded to the member’s nonmember spouse pursuant to Section 22652, equaled at least 20 years, provided that the amount payable to the member pursuant to this section shall be based on the amount of service credited to the member, excluding service credited pursuant to Sections 22714, 22715, 22717, and 22826, and the amount awarded to the nonmember spouse, and further provided that the minimum allowance specified in subdivision (a) shall be reduced to an amount equal to that minimum allowance multiplied by the ratio of (i) the amount of service credited to the member, excluding service credited pursuant to Sections 22714, 22715, 22717, and 22826, to (ii) the sum of the amount of service credited to the member, excluding service credited pursuant to Sections 22714, 22715, 22717, and 22826, and the amount awarded to the nonmember spouse.

(d) A benefit shall be paid
pursuant to this section to a retired member receiving a benefit pursuant to Section 24410.5 if (1) the member meets the criteria of subparagraph (F) of paragraph (2) of subdivision (c), and (2) the allowance payable under that subparagraph, after the application of all allowances and allowance increases authorized by this part, including those specified in Sections 24412 and 24415, is greater than the allowance payable under Section 24410.5, after the application of all allowances and allowance increases authorized by this part, including those specified in Sections 24412 and 24415.

(e) A retired member, option beneficiary, or surviving spouse subject to this section shall receive the annual minimum allowance pursuant to this section unless the system receives in writing, on a form prescribed by the system, notification from the member, option beneficiary, or surviving spouse of his or her election not to receive the increase provided under
this section.

(f) Benefits payable under this section shall be initially paid by the system on or before September 1, 2001.

(g) The amendments to this section made by the act adding this subdivision does not constitute a change in, but is declaratory of, the existing law.

(a) The monthly allowance payable on the effective date of this section, excluding annuities payable from accumulated annuity deposit contributions and tax-sheltered annuity contributions and benefits payable pursuant to Sections 24410.5 and 24410.6, to retired members and nonmember spouses, disabled members, and beneficiaries, including option beneficiaries, shall be increased by the percentage set forth opposite the applicable period during which retirement, disability, or death occurred set forth in the following schedule:

Period during which retirement, disability, or death occurred:

Percentage:

36 months ending Dec. 31, 2000

0.0%

12 months ending Dec. 31, 1997

1.0%

24
months ending Dec. 31, 1996

2.0%

60 months ending Dec. 31, 1994

3.0%

60 months ending Dec. 31, 1989

4.0%

120 months ending Dec. 31, 1984

5.0%

Dec. 31, 1974 or earlier

6.0%

(b) The increase provided pursuant to this section is in addition to any payments received by a retired member or nonmember spouse, disabled member, or beneficiary, including an option beneficiary, under Section 24415.

(c) If the monthly allowance payable is adjusted after the effective date of this section, the percentage increase applied on the effective date of this section shall be applied to the adjusted monthly allowance payable.

(d) Benefits payable under this section shall be initially payable by the system on or before July 1, 2001.

(a) The annual revenues deposited to the Teachers’ Retirement Fund pursuant to Section 6217.5 of the Public Resources Code are continuously appropriated without regard to fiscal year for the purposes of this section and shall be distributed annually in quarterly supplemental payments commencing on September 1 of each year to retired members, disabled members, and beneficiaries under the Defined Benefit Program. The amount available for distribution in any year shall be the income for that year from the sale or use of school lands and lieu lands, as estimated by the State Lands Commission prior to the beginning of the fiscal year, adjusted by the difference between the estimated and actual income for the
preceding fiscal year. The board shall deduct from the revenues an amount necessary for administrative expenses to implement this section.

(b) The net revenues to be distributed shall be allocated among those retired members, disabled members, and beneficiaries, as defined in subdivision (a) of Section 22107, whose allowances under the Defined Benefit Program, after applying the annual improvement factor as defined in Section 22140, if any, are below 80 percent of the purchasing power of the base allowance. The purchasing power calculation for each individual allowance shall be based on the change in the All Urban California Consumer Price Index between June of the calendar year of retirement and June of the fiscal year preceding the fiscal year of the distribution. The allocation shall provide a pro rata share of the amount needed to restore
the allowance payable, after application of the current year annual improvement factor to 80 percent of the purchasing power of the base allowance.

(c) The allowance increase shall not be applicable to annuities payable from the accumulated annuity deposit contributions or the accumulated tax-sheltered annuity contributions.

(d) In any year that the net revenues from school lands and lieu lands is greater than that needed to adjust the allowances of all retired members, disabled members, and beneficiaries, as defined in subdivision (a) of Section 22107, under the Defined Benefit Program to 80 percent of the purchasing power of the base allowance, the net revenues in excess of that needed for distribution shall be used by the board to reduce the unfunded actuarial obligation of
the fund, if any.

(e) The board shall inform each recipient of supplemental payments under this section that the increases are not cumulative and are not part of the base allowance.

Notwithstanding Section 24412, revenues from school lands or lieu lands related to the claim of the State of California to the school lands within the area referred to as the Elk Hills Naval Petroleum Reserve, shall be deposited in the Supplemental Benefit Maintenance Account.

(a) The proceeds of the Supplemental Benefit Maintenance Account shall be distributed annually in quarterly supplemental payments commencing on September 1, 1990, to retired members, disabled members, and beneficiaries, as defined in subdivision (a) of Section 22107. The amount available for distribution in any fiscal year shall not exceed the amount necessary to restore purchasing power up to 85 percent of the purchasing power of the base allowance, after the application of all allowance increases authorized by this part, including those specified in Section 24412, and excluding those provided pursuant to Sections 24410.5, 24410.6, and 24410.7.

(b) The net revenues to be distributed
shall be allocated among those retired members, disabled members, and beneficiaries, as defined in subdivision (a) of Section 22107, whose allowances, after sequentially applying the annual improvement factor as defined in Sections 22140 and 22141, and the annual supplemental payment as specified in Section 24412, have the lowest purchasing power percentage. The purchasing power calculation for each individual shall be based on the change in the All Urban California Consumer Price Index between June of the calendar year of retirement and June of the fiscal year preceding the fiscal year of distribution. In any year in which the purchasing power of the allowances of all retired members, disabled members, and beneficiaries, as defined in subdivision (a) of Section 22107, equals not less than 85 percent and additional funds remain from the allocation authorized by this section, those funds shall
remain in the Supplemental Benefit Maintenance Account for allocation in future years.

(c) The allowance increase shall not be applicable to annuities payable from the accumulated annuity deposit contributions or the accumulated tax-sheltered annuity contributions.

(d) The increases provided by subdivision (b) are not cumulative, not part of the base allowance, and will be payable only to the extent that funds are available from the Supplemental Benefit Maintenance Account. The board shall inform each recipient of the contents of this subdivision.

(e) The adjustments authorized by this section are vested only up to the amount payable as a result of the annual appropriation made pursuant to Section 22954 and
the adjustments made by the board pursuant to Section 24415.5. The adjustments authorized by this section shall not be included in the base allowance for purposes of calculating the annual improvement defined by Sections 22140 and 22141.

(f) Notwithstanding subdivision (b), for purposes of restoring the purchasing power of benefits provided pursuant to Section 24410.5 for members and beneficiaries receiving benefits pursuant to subdivision (b), the purchasing power calculation shall be based on 85 percent of the change in the All Urban California Consumer Price Index between January 2000 and June of the fiscal year preceding the fiscal year of distribution, after the application of increases authorized by Section 24412 that are made to the allowances provided pursuant to Section 24410.5.

(g) Notwithstanding subdivision (b), for purposes of restoring the purchasing power of benefits provided pursuant to Sections 24410.6 and 24410.7 for members and beneficiaries receiving benefits pursuant to subdivision (b), the purchasing power calculation shall be based on 85 percent of the change in the All Urban California Consumer Price Index between January 2001 and June of the fiscal year preceding the fiscal year of distribution, after the application of increases authorized by Section 24412 that are made to the allowances provided pursuant to Sections 24410.6 and 24410.7.

(a) Notwithstanding any other provision of this chapter, the board shall adjust the purchasing power protection benefits payable pursuant to Sections 24415, 24416, and 24417 in accordance with subdivisions (b) and (c) of this section.

(b) If the board, in adopting the actuarial projection described in subdivision (a) of Section 22954.1, determines that the annual transfers to the Supplemental Benefit Maintenance Account described in Section 22954, combined with all other
anticipated sources of income to the account, are likely to be less than sufficient over the term established by the board to continue providing the purchasing power protection being provided at the time of the projection, it shall identify the maximum level of purchasing power protection benefits that it expects to be sustainable over that term, as specified in subdivision (c) of Section 22954.1. The board, upon making the determination specified in subdivision (c) of Section 22954.1, shall reduce the purchasing power protection benefits payable pursuant to Sections 24415, 24416, and 24417 to the maximum sustainable level identified under this subdivision, except that these benefits shall not be adjusted below the 80 percent purchasing power protection level unless the board has made the determination of insufficient funds described in subdivision (a) of Section 24416.

(c) If the board, in adopting the actuarial projection described in
subdivision (a) of Section 22954.1, determines that the annual transfers to the Supplemental Benefit Maintenance Account described in Section 22954, combined with all other anticipated sources of income to the account, are likely to be more than sufficient over the term established by the board to continue providing the purchasing power protection being provided at the time of the projection, it shall identify the maximum level of purchasing power protection benefits that it expects to be sustainable over that term, as specified in subdivision (b) of Section 22954.1. The board, upon making the determination specified in subdivision (b) of Section 22954.1, shall increase the purchasing power protection benefits payable pursuant to Sections 24415, 24416, and 24417 to the maximum sustainable level identified under this subdivision, except that these benefits shall not be adjusted above the 85 percent purchasing power protection level.

(d) If the
board identifies, pursuant to subdivision (b) of Section 22954.1, that the maximum level of purchasing power protection benefits it expects to be sustainable over the term established by the board is greater than the 85 percent level, it shall develop one or more proposals for options for the use of the anticipated Supplemental Benefit Maintenance Account moneys in excess of those believed to be necessary to sustain purchasing power protection benefits at the 85 percent level over the term established by the board. The options that the board proposes for use of these moneys shall be for the exclusive benefit of members and beneficiaries, and at least one of these proposed options shall be an increase in benefits for any surviving members who retired prior to January 1, 1999, and any surviving beneficiaries of members who retired prior to January 1, 1999. The board shall either include a summary of these proposed options in the report described in subdivision (f) of Section 22954.1 or, within 60 days after
submission of that report, submit a separate letter to the recipients of the report described in subdivision (f) of Section 22954.1 that contains a summary of these proposed options. The board shall also submit a summary of these proposed options to the Governor.

(e) The board shall adopt and, after such adoption, may amend and repeal regulations concerning its powers described in this section, and it shall file these regulations, and amended and repealed regulations, with the Secretary of State. The adoption, amendment, or repeal of a regulation authorized by this section is hereby exempted from the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code).

(a) If the board determines by June 30 of the then current fiscal year that the Supplemental Benefit Maintenance Account will not have sufficient funds to provide purchasing power protection benefits, as established in this chapter, of at least 80 percent for the subsequent fiscal year, the board, for that year, may do either, or a combination of the following:

(1) Increase the employer contribution rate commencing in the next fiscal year by an amount that would provide
sufficient funds for no more than the estimated difference between the funds in the Supplemental Benefit Maintenance Account and the amount needed to pay the benefit level specified by the board, provided the benefit level is no more than 85 percent. Notwithstanding any other provision of this part, the increase in the employer contribution rate shall only become operative if the increase is approved or authorized in the Budget Act.

(2) Reduce the supplemental benefit payment for the subsequent fiscal year to the amount that can be funded by the available funds in the Supplemental Benefit Maintenance Account.

(b) If the board finds that there is no unfunded obligation, as determined by the board’s professional consulting actuary and affirmed by the Director of Finance, then in addition to the authority pursuant to subdivision (a), the board may transfer to an auxiliary
Supplemental Benefit Maintenance Account, from any funds that are in excess of the amount needed to fund fully the benefits for which the Teachers’ Retirement Fund is liable, an amount that would provide sufficient funds for no more than the estimated difference between the funds in the Supplemental Benefit Maintenance Account and the amount needed to pay the benefit level specified by the board, provided the benefit level is no more than 85 percent.

(c) If the board increases the employer contribution rate pursuant to paragraph (1) of subdivision (a), the increase between the current fiscal year contribution rate and the contribution rate in the next fiscal year, shall not exceed one-quarter of 1 percent of the creditable compensation upon which contributions are based.

(a) The proceeds of an auxiliary Supplemental Benefit Maintenance Account shall be distributed annually in quarterly supplemental payments, commencing when funds in the Supplemental Benefit Maintenance Account are insufficient to support 85 percent, to retired members, disabled members, and beneficiaries, as defined in subdivision (a) of Section 22107. The amount available for distribution in any fiscal year shall not exceed the amount necessary to restore purchasing power up to 85 percent of the purchasing power of the initial monthly
allowance after the application of all allowance increases authorized by this part, including those specified in Sections 24412 and 24415, and excluding those provided pursuant to Sections 24410.5, 24410.6, and 24410.7.

(b) The net revenues to be distributed shall be allocated among those retired members, disabled members, and beneficiaries, as defined in subdivision (a) of Section 22107, whose allowances, after sequentially applying the annual improvement factor as defined in Sections 22140 and 22141, and the annual supplemental payment as specified in Sections 24412 and 24415, have the lowest purchasing power percentage. The purchasing power calculation for each individual shall be based on the change in the All Urban California Consumer Price Index between June of the calendar year of the benefit effective date and June of the fiscal year preceding the fiscal year of distribution.

(c) The allowance increase shall not be applicable to annuities payable from the accumulated annuity deposit contributions or the accumulated tax-sheltered annuity contributions.

(d) The increases provided by subdivision (b) are not cumulative, nor part of the base allowance, and will be payable only to the extent that funds are available from the Supplemental Benefit Maintenance Account and the auxiliary Supplemental Benefit Maintenance Account. The board shall inform each recipient of the contents of this subdivision.

(e) The distributions authorized by this section are vested only up to the amount payable as a result of the annual appropriation made pursuant to Section 22954 and the adjustments made by the board pursuant to Section 24415.5. The distributions authorized by this section shall not be included in the base allowance for purposes of calculating the
annual improvement defined by Sections 22140 and 22141.

(f) Notwithstanding subdivision (b), for purposes of restoring the purchasing power of benefits provided pursuant to Section 24410.5 for members and beneficiaries receiving benefits pursuant to subdivision (b), the purchasing power calculation shall be based on 85 percent of the change in the All Urban California Consumer Price Index between January 2000 and June of the fiscal year preceding the fiscal year of distribution, after the application of increases authorized by Section 24412 that are made to the allowances provided pursuant to Section 24410.5.

(g) Notwithstanding subdivision (b), for purposes of restoring the purchasing power of benefits provided pursuant to Sections 24410.6 and 24410.7 for members and beneficiaries receiving benefits pursuant to subdivision (b), the purchasing power calculation shall be based on
85 percent of the change in the All Urban California Consumer Price Index between January 2001 and June of the fiscal year preceding the fiscal year of distribution, after the application of increases authorized by Section 24412 that are made to the allowances provided pursuant to Sections 24410.6 and 24410.7.